Feds Target Patent Trolls, Product Counterfeiters

FTC unveils updated strategic plan to pursue patent chasers.

The same day the Obama Administration released updated plans to protect U.S. intellectual property, the head of the Federal Trade Commission announced the agency would be taking more active efforts to examine the impact of "Patent Assertion Entities" -- more commonly called patent trolls.

"It's important to us that we have the right approach in terms of enforcement," said Victoria Espinel, the U.S. Intellectual Property Enforcement Coordinator at a press briefing June 20, where she announced new efforts the government plans to take, detailed in a document titled "Joint Strategic Plan on Intellectual Property Enforcement." "We want to make piracy and counterfeiting less [profitable]," she added. The strategic plan is an update of the plan issued in 2010.

The stakes for the U.S. economy are enormous, according to Espinel. Intellectual property industries, which include everything from the IT software to Hollywood movies to pharmaceuticals, comprised almost 35% of the U.S. GDP in 2010, or more than $5 trillion. They also represent 60% of all American exports and more than 40 million jobs, directly and indirectly.

But a growing factor in the battle to protect U.S. intellectual property is the flood of patent litigation brought by companies for which the litigation itself is their business. The strategic plan points to actions taken earlier this month by the White House Task Force on High-Tech Patent Issues to crack down on frivolous and predatory litigation.

For many in the IT industry, patent trolls -- companies that buy small or struggling firms in order to obtain the patents they hold, and then embark on a string of lawsuits against other companies that may use aspects of the patents in their own products -- represent a form of intellectual piracy. The PAE's claims may not be true, but many companies would rather settle out of court than spend years in litigation.

Edith Ramirez, chairwoman of the FTC, didn't say "troll" during her keynote speech before a workshop hosted by the American Antitrust Institute and the Computer & Communications Industry Association, but she did warn that PAEs "are evolving in ways that raise red flags for competition and consumers."

For instance, Ramirez said, beginning in 2012 the majority of patent infringement lawsuits were filed by PAEs, reflecting the tripling of these lawsuits since 2007. "Some evidence, along with common sense, suggests that many more PAE lawsuits are threatened than filed."

In addition, patent trolls appear to be developing new strategies that can create even greater economic damage. Ramirez said there is a trend toward "privateering," where companies will transfer their patents to a PAE, which then targets the original patent holder's competitors.

"The sale [of the patents] may be structured to encourage the PAE to target the original owner's downstream rivals," Ramirez said. "The … company benefits indirectly if the PAE raises its rivals' costs. There are variations on this theme, but that is the core fact pattern."

Ramirez said the FTC will be studying PAE activity to determine the costs and benefits to the U.S. economy. Other agencies will be tackling aspects of the problem as well. "Earlier this week, the [Patent and Trademark Office] announced it will begin a rulemaking to require patent applicants and owners to regularly update patent ownership information," she added.

infringers and their paid puppetsG«÷ definition of G«ˇpatent trollG«÷: anyone who has the nerve to sue us for stealing their invention

The patent system now teeters on the brink of lawlessness. Call it what you will...patent hoarder, patent troll, non-practicing entity, shell company, etc. It all means one thing: G«£weG«÷re using your invention and weG«÷re not going to stop or payG«•. This is just dissembling by large invention thieves and their paid puppets to kill any inventor support system. It is purely about legalizing theft. The fact is, many of the large multinationals and their puppets who defame inventors in this way themselves make no products in the US or create any American jobs and it is their continued blatant theft which makes it impossible for the true creators to do so. To them the only patents that are legitimate are their own -if they have any.

ItG«÷s about property rights. They should not only be for the rich and powerful. Our founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity and the jobs the commercialization of those inventions bring. For 200 years the patent system has not only fueled the US economy, but the worldG«÷s. If we weaken the patent system we force inventors underground like Stradivarius (anyone know how to make a Stradivarius violin?) and in turn weaken our economy and job creation. Worse yet, we destroy the American dream -the ability to prosper from our ingenuity for the benefit of our children and communities. Who knows who the next Alexander Graham Bell will be. It could be your son or daughter. It could be you. To kill or weaken the patent system is to kill their futures. Show me a country with weak or ineffective property rights and IG«÷ll show you a weak economy with high unemployment. If we cannot own the product of our minds or labors, what can we be said to truly own. Life and liberty are fundamentally tied to and in fact based on property rights. Our very lives are inseparably tied to our property. Large multinational corporations are on the brink of destroying the American dream -our ability to pull ourselves up by our bootstraps from the working classes by building our own companies while making better futures for our children and our communities.

Prior to eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the Supreme Court decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you donG«÷t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back into the patent system with injunctions fully enforceable on all infringers by all patentees, large and small.

Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

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